Disney objects to AOL-Time deal

Raises concerns about discrimination on cable network

JonFriedman

NEW YORK (CBS.MW) - Media titan Walt Disney has asked the Federal Communications Commission to consider blocking the merger of America Online and Time Warner unless the two companies agree to separate ownership of the cable TV network.

While the FCC has given no indication that it’s prepared to stop the deal on those grounds, it has been actively considering the issue. In late June, the agency expanded its probe of the merger and asked the two companies for more information on how they planned to operate in various markets after the deal was concluded.

In a meeting July 7, Disney executives told FCC officials they are worried that the combined entity will give favorable treatment on Time Warner’s cable network, the nation’s second largest, to content developed by AOL-Time Warner over content from rivals such as Disney.

The Disney objection rekindles the acrimony that surfaced a few months ago, when Time Warner yanked the signal for Disney’s ABC television network, sparking an unusual public feud between the two media powers.

Disney said the merger should go forward only if the ownership of the merged company’s content is separated from ownership of Time Warner’s cable business, according to documents filed with the FCC.

It’s unclear whether Disney has legitimate concerns or if it’s sending a message to Time Warner and seeking to make life difficult for the new company.

John Dreyer, spokesman for Disney declined comment. Time Warner’s Scott Miller labeled the Disney objection to be “absurd,” and reiterated that Time Warner intended to keep the new company’s communications networks open to many parties.

On Monday, AOL’s shares rose 1/2 to 62 9/16 and Time Warner was up 9/16 to 89 13/16. Disney’s stock fell 1 5/16 to 36 1/8.

Time Warner Chairman Gerald Levin has attempted to quash fears that the merged company will minimize or exclude the content of such rivals as Disney, insisting that new company’s Internet and cable systems will be open to rivals.

The $140-billion merger pairs up the largest Internet provider and the biggest media company.

Disney Chairman Michael Eisner has said Disney (DIS) is content not to seek a merger partner of its own, although speculation persists that it will look for an alliance with Yahoo (YHOO).

The timing of the Disney filing comes at an inopportune moment for Time Warner (TWX) and AOL (AOL). Time Warner reports its earnings on Tuesday while AOL follows suit on Thursday. AOL and Time Warner have said they expect to wrap up their merger this fall.

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